(1) Transactions between an RM and the reinsurer such RM represents
shall only be entered into pursuant to a written contract specifying the
responsibilities of each party, which shall be approved by the reinsurer's board of
directors. At least thirty days before such reinsurer assumes or cedes business
through such producer, a true copy of the approved contract shall be filed with the
commissioner for approval. The contract shall, at a minimum, contain provisions
that incorporate all of the following:
(a) The reinsurer may terminate the contract for cause upon written notice to
the RM. The reinsurer may suspend the authority of the RM to assume or cede
business during the pendency of any dispute regarding the cause for termination.
(b) The RM shall render accounts to the reinsurer accurately detailing all
material transactions, including information necessary to support all commissions,
charges, and other fees received by, or owing to, the RM, and remit all funds due
under the contract to the reinsurer on not less than a monthly basis;
(c) All funds collected for the reinsurer's account shall be held by the RM in
a fiduciary capacity in a bank that is a qualified United States financial institution as
defined in section 10-1-102 (17). The RM may retain no more than three months'
estimated claims payments and allocated loss adjustment expenses. The RM shall
maintain a separate bank account for each reinsurer that such RM represents.
(d) For at least ten years after expiration of each contract of reinsurance
transacted by the RM, the RM shall keep a complete record for each transaction
showing:
(I) The type of contract, limits, underwriting restrictions, classes, or risks and
territory;
(II) The period of coverage, including effective and expiration dates,
cancellation provisions, notice required for cancellation, and disposition of
outstanding reserves on covered risks;
(III) The reporting and settlement requirements of balances;
(IV) The rate used to compute the reinsurance premium;
(V) The names and addresses of reinsurers;
(VI) The rates of all reinsurance commissions, including the commissions on
any retrocessions handled by the RM;
(VII) Related correspondence and memoranda;
(VIII) Proof of placement;
(IX) Details regarding retrocessions handled by the RM, as permitted by
section 10-2-909 (4), including the identity of retrocessionaires and percentage of
each contract assumed or ceded;
(X) Financial records, including but not limited to premium and loss
accounts; and
(XI) When the RM places a reinsurance contract on behalf of a ceding
insurer:
(A) Directly from any assuming reinsurer, written evidence that the assuming
reinsurer has agreed to assume the risk; or
(B) If placed through a representative of the assuming reinsurer, other than
an employee, written evidence that such reinsurer has delegated binding authority
to the representative;
(e) The reinsurer shall have access and the right to copy all accounts and
records maintained by the RM related to such RM's business in a form usable by the
reinsurer;
(f) The contract cannot be assigned in whole or in part by the RM;
(g) The RM shall comply with the written underwriting and rating standards
established by the insurer for the acceptance, rejection, or cession of all risks;
(h) The contract sets forth the rates, terms, and purposes of commissions,
charges, and other fees which the RM may levy against the reinsurer;
(i) (I) If the contract permits the RM to settle claims on behalf of the
reinsurer, all claims shall be reported to the reinsurer in a timely manner.
(II) A copy of the claim file shall be sent to the reinsurer at its request or as
soon as it becomes known that the claim:
(A) Has the potential to exceed the lesser of an amount determined by the
commissioner or the limit set by the reinsurer;
(B) Involves a coverage dispute;
(C) May exceed the RM claims settlement authority;
(D) Is open for more than six months; or
(E) Is closed by payment of the lesser of an amount set by the commissioner
or an amount set by the reinsurer;
(III) All claim files shall be the joint property of the reinsurer and RM;
however, upon an order of liquidation of the reinsurer, such files shall become the
sole property of the reinsurer or its estate; the RM shall have reasonable access to
and the right to copy the files on a timely basis;
(IV) Any settlement authority granted to the RM may be terminated for
cause upon the reinsurer's written notice to the RM or upon the termination of the
contract. The reinsurer may suspend the settlement authority during the pendency
of the dispute regarding the cause of termination.
(j) If the contract provides for a sharing of interim profits by the RM, that
such interim profits will not be paid until one year after the end of each
underwriting period for property business and five years after the end of each
underwriting period for casualty business or a later period set by the commissioner
for specified lines of insurance and not until the adequacy of reserves on remaining
claims has been verified pursuant to section 10-2-909 (3);
(k) The RM shall annually provide the reinsurer with a statement of its
financial condition prepared by an independent certified accountant;
(l) The reinsurer shall periodically and at least semiannually conduct an on-site review of the underwriting and claims processing operations of the RM;
(m) The RM shall disclose to the reinsurer any relationship such RM has with
any insurer prior to ceding or assuming any business with such insurer pursuant to
the contract;
(n) The acts of the RM shall be deemed to be the acts of the reinsurer on
whose behalf it is acting.